Do You Need to Buy Nanny Insurance?

Hiring a nanny can provide much-needed support for busy families, offering dependable care and care stability for children. For nannies, the job can be incredibly rewarding, offering the chance to work closely with families. But both nannies and employers must be aware of the potential risks, like injuries, car accidents, and legal issues.

A few insurance products protect against the risks your home insurance doesn’t cover. Here’s what you need to know about the types of nanny insurance to consider when hiring a nanny or working as one.

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Is nanny insurance required?

Having insurance while employing a nanny is often necessary, but it largely depends on the situation. The nanny’s employment arrangement, the assets you own and want to protect, and your state’s laws can help determine whether you legally need it or if it’s “nice to have.”

Nannies are domestic workers and can sometimes fall under the status of “employee.” As a household employer, some states require you to have a workers’ compensation insurance policy. If you’re hiring through a firm or agency, the agency might consider the nanny an employee and provide insurance protection.

But if you work directly with a household, you may need to provide workers’ compensation, auto coverage, and other insurance safeguards.^[1]

Types of insurance nannies should buy

The types of policies you should buy are as unique as the families you work for. No universal coverage works for every situation. About 226,000 nannies work in the U.S., according to the Economic Policy Institute (EPI).^[2]

That said, liability insurance and auto insurance should be at the top of the list of policies you should consider. Both can help you avoid paying out of pocket if something goes wrong while providing home care for children.

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  Liability coverage

  If you cause injury to a child or damage to a client’s property, liability insurance can step in to protect you. For example, liability insurance can help pay for medical bills or repairs if a child falls off a swing and incurs an injury or if you drop a glass of red juice and stain an antique area rug.

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  Auto insurance — if the nanny drives their own vehicle

  If you drive your own car while working as a nanny to drive kids to school or activities, make sure your auto insurance covers it. Standard coverage might not cover a car accident that happens while you’re on the road for work. You may need to add a policy rider to your current coverage or buy commercial car insurance so you’re not dipping into your own funds for accidents.

  Parents should also review a nanny’s car insurance coverage before allowing their children to ride with them.

Insurance you should have for your nanny

The insurance you need for your domestic employee depends on whether the IRS labels them as your employee. Generally, the IRS considers nannies household employees if you control their work and duties, whether they work full time or part time.^[3]

Workers’ compensation insurance

Workers’ compensation insurance helps cover medical expenses and lost wages if your nanny incurs an injury while working. For instance, they might slip on a wet floor or pull a muscle lifting your child.

Workers’ compensation insurance requirements vary by state. For example, California, New York, and Texas have the highest number of nannies in the U.S., according to the EPI. California and New York require workers’ comp if your nanny is an employee, while Texas doesn’t. So, refer to your local laws for information about whether you need this coverage.

Health insurance

You don’t have to provide health insurance when you employ a nanny.^[4] But offering health coverage for typical healthcare expenses, like doctor visits and unexpected health emergencies, can make your household more attractive to top-tier candidates.

If you can’t foot the entire cost of health insurance, you could consider making contributions to the nanny’s health insurance premium. It shows your commitment to supporting your nanny beyond just the paycheck.

Auto insurance — if the nanny drives your car

You may need to add your nanny to your car insurance policy if they use your car to run errands or take the kids to activities. Consider raising your policy limits, too, for extra protection. Coverage can vary, so check with your insurance agent to explore options for your specific situation.

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Cost of nanny insurance

Several factors influence the cost of nanny insurance, including what the law requires, how much protection you want to provide, and the specific coverages you choose. Here’s a look at the typical costs for different types of nanny insurance.

Professional liability and general liability insurance cost between $420 and $1,000 per year, on average. It’s the nanny’s responsibility to purchase this type of coverage.

Your state could require you to purchase workers’ compensation coverage for domestic employees. The average policy runs from $542 to $972 per year, though the cost depends on your nanny’s hours and the coverage limits you select.

If your nanny will drive their own vehicle when transporting your children, they’re responsible for getting (and paying for) their car insurance coverage. But if you plan on them driving your car, you’ll want to add them to your auto policy. Adding another driver could increase your car insurance rates by about $1,000 per year.

If you choose to provide health insurance, you’re looking at an additional $8,400 per year, on average.^[5]

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